DavidsTea CEO exits after shareholders elect co-founder’s slate

DavidsTea shareholders vote to overhaul board

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MONTREAL -- DavidsTea's CEO resigned Thursday after losing a battle with the company's co-founder that saw the entire board replaced over the direction of the struggling specialty-beverage retailer.

Chief executive Joel Silver, who led an attempt to prevent a shareholder revolt led by Herschel Segal, quit after the vote results were announced at the company's annual meeting.

Segal took over as executive chairman and interim CEO and the company said it will begin a search for a permanent chief executive to replace Silver, who was in the position for little more than a year.

Fifty-four per cent of the votes cast at the shareholder meeting backed Segal's slate of seven directors over the management nominees.

Segal pledged Thursday that the chain of 240 stores in Canada and the U.S. will become profitable within a year and focus on its Canadian roots.

"We now have a little time to examine exactly how we can get this company back on track."

Segal, a veteran retailer who also founded clothing chain Le Chateau, said DavidsTea has a great brand and product that has failed to find its footing in the United States.

"After six years of working in it, not only did we not make it in the States because there's a different culture and a different customer there and what we did was at the same time neglect Canada."

Some U.S. stores might be closed but first DavidsTea's brand mission has to be clarified and made efficient to restore profitability, Segal said in a brief news conference.

Also elected to the board were corporate director William Cleman, Viau Foods president Pat De Marco, retired professor Ludwig Max Fisher, former MEC chief executive Peter Robinson and Roland Walton, former president of Tim Hortons Canada and Le Chateau president Emilia Di Raddo.

The Montreal-based company lost $30 million last year on $224 million of sales. The losses included one-time separation costs for a former CEO, impairment charges and the impact of onerous contracts.

"We're now going back to look at what we need for Canada," Segal said. "The U.S. situation is on hold."

Segal said he hasn't looked at privatizing or selling the company, which he insisted still has a future. Tea is a social, calming beverage that is a departure from sugar drinks, energy beverages and coffee jolts, he said.

However, not many people have figured out how to make a tea business successful, he said, pointing to Starbuck's, which closed its Teavana chain in January about five years after purchasing the division for US$620 million.

Segal's holding company Rainy Day Investments Ltd., which owns about 46 per cent of the outstanding shares, was up against three investment companies that together control 36.5 per cent of the shares. They accused Segal of trying to acquire the company without paying a premium.

Benjamin Gisz, director of TDM Asset Management Pty Ltd, which has 12.2 per cent of DavidsTea shares, said after the vote that he wasn't surprised by the result.

"We hope the board does well, we just never supported Mr. Segal as being the leader of the board or the management team," he said in an interview.

"We just want to see this brand thrive and the key to doing that is creating an environment where great people can come to the business and the key to that is to make sure that the management team is given a clear mandate from the board, clear accountability and a plan to execute."

DavidsTea has been publicly traded since June 2015, when it listed on the Nasdaq as part of an expansion plan.

Shares of DavidsTea have plummeted from nearly US$30 in 2015 to just US$4.15, up 5.1 per cent in trading Thursday on the Nasdaq.